DO008 Audit and Inspection Plan - FINAL

DO008 Audit and Inspection Plan - FINAL

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audit 2005/2006 Audit and Inspection Plan Dorset Fire and Rescue Service INSIDE THIS PLAN PAGES 2 – 5 • Introduction • Our responsibilities • The fee • Summary of key audit risks • Grant claim certification • Voluntary improvement work • The team PAGES 6 – 10 Appendices • Appendix 1 – The new Code of Audit Practice • Ax 2 – Audit and inspection fee • Appendix 3 – Planned outputs • Ax 4 – The Audit Commission’s requirements in respect of independence and objectivity Reference: DO008 Audit and Inspection Plan Date: January 2006 audit 2005/2006 AUDIT AND INSPECTION PLAN Introduction This plan sets out the audit work that we propose to undertake in 2005/06. It replaces the interim plan discussed and agreed in April 2005 to reflect the outcome of the CPA review which was reported in June 2005 and which rated the Authority as 'good'. The plan has been drawn up from our risk-based approach to audit planning and reflects, in addition to your comprehensive performance assessment (CPA) rating, the following matters: • the impact of the new Code of Audit Practice which comes into effect in April 2005; • your local risks; • current national risks relevant to your local circumstances; and • the impact of International Standards on Auditing (UK and Ireland) (ISAs). Our responsibilities In carrying out our audit and inspection duties we have to comply with the statutory ...

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audit2005/2006Audit and Inspection Plan
Dorset Fire and Rescue Service
I N S I D E T H I S P L A N
P A G E S 2 – 5 Introduction Our responsibilities The fee Summary of key audit risks Grant claim certification Voluntary improvement work The team
P A G E S 6 – 1 0
Appendices Appendix 1 – The new Code of Audit Practice Appendix 2 – Audit and inspection fee Appendix 3 – Planned outputs Appendix 4 – The Audit Commission’s  requirements in respect of  independence and objectivity Reference:DO008 Audit and Inspection Plan
Date:
January 2006
audit 2005/2006
Introduction
AUDIT AND INSPECTION PLAN
This plan sets out the audit work that we propose to undertake in 2005/06. It replaces the interim plan discussed and agreed in April 2005 to reflect the outcome of the CPA review which was reported in June 2005 and which rated the Authority as 'good'.
The plan has been drawn up from our riskbased approach to audit planning and reflects, in addition to your comprehensive performance assessment (CPA) rating, the following matters:
the impact of the new Code of Audit Practice which comes into effect in April 2005;
your local risks;
current national risks relevant to your local circumstances; and
the impact of International Standards on Auditing (UK and Ireland) (ISAs).
Our responsibilities
In carrying out our audit and inspection duties we have to comply with the statutory requirements governing them, and in particular:
the Audit Commission Act 1998 and the Code of Audit Practice (the Code) with regard to audit; and
the Local Government Act 1999 with regard to best value inspection and audit.
The Code has been revised with effect from 1 April 2005. The key changes include:
the requirement to draw a positive conclusion regarding the Authority’s arrangements for ensuring value for money in its use of resources; and
a clearer focus on overall financial and performance management arrangements.
Such corporate performance management and financial management arrangements form a key part of the system of internal control and comprise the arrangements for:
establishing strategic and operational objectives;
determining policy and making decisions;
ensuring that services meet the needs of users and taxpayers and for engaging with the wider community;
ensuring compliance with established policies, procedures, laws and regulations;
identifying, evaluating and managing operational and financial risks and opportunities, including those arising from involvement in partnerships and joint working;
ensuring compliance with the general duty of best value, where applicable;
managing its financial and other resources, including arrangements to safeguard the financial standing of the audited body;
monitoring and reviewing performance, including arrangements to ensure data quality; and
ensuring that the audited body’s affairs are managed in accordance with proper standards of conduct, and to prevent and detect fraud and corruption.
The audited body is responsible for reporting on these arrangements as part of its annual Statement on Internal Control.
Further details for the new Code are set out in Appendix 1.
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The fee
AUDIT AND INSPECTION PLAN
The fee estimate for the audit and inspection work planned for 2005/06 is £44,550 (2004/05: £51,000). The fee is based on the Audit Commission’s fee guidance contained within its operational plan and reflects the Authority’s comprehensive performance assessment (CPA) overall score of 'good'.
Further details are provided in Appendix 2 including the assumptions made when determining the fee.
Summary of key audit risks
This section summarises our assessment and the planned response to the key audit risks which may have an impact on our objectives to:
provide an opinion on your financial statements;
provide a conclusion on your use of resources; and
provide a report on the Authority’s best value performance plan.
Our planned work takes into account information from other regulators, where available. Where risks are identified that are not mitigated by information from other regulators, or your own risk management processes, including Internal Audit, we will perform work as appropriate to enable us to provide a conclusion on your arrangements.
The expected outputs from this work are outlined in Appendix 3.
CPA and inspections
Following the Authority’s classification as a ‘good’ authority in the 2005 comprehensive performance assessment, we have applied the principles of strategic regulation recognising the key strengths and weaknesses in DFRS’s performance. On this basis our work will be limited to monitoring and commenting upon your progress and achievements in implementing the corporate improvement plan developed following the CPA inspection.
Use of resources
The new Code of Audit Practice requires us to issue a conclusion on whether you have proper arrangements in place for securing economy, efficiency and effectiveness in the use of your resources. In meeting this responsibility, we will review evidence that is relevant to the Council’s corporate performance management and financial management arrangements.
The outcome from this work will be a value for money (VFM) opinion, to be given alongside our opinion on the Authority’s accounts by September 2006.
We will undertake a review of your best value performance plan (BVPP) which is embodied in your Community Safety Plan to ensure that it meets the statutory requirement in respect of its content. We will issue an opinion on this plan before the end of December 2005. We will also review and comment on your systems for collecting performance information and in particular the best value performance indicators (BVPIs).
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Financial statements
AUDIT AND INSPECTION PLAN
We will carry out our audit of the 2005/06 financial statements and have regard to the newly introduced International Standards of Auditing (ISAs).
We are also required to review whether the Statement of Internal Control has been presented in accordance with relevant requirements and to report if it does not meet these requirements or if it is misleading or inconsistent with our knowledge of the Authority.
On the basis of our preliminary work to date we have identified the following audit risks.
SUMMARY OF OPINION RISKS
Opinion risks
The Authority will be required to adopt group accounts fully from 2005/06.
This will be the second dryrun year for Whole of Government Accounts (WGA), and this will be the first year that WGA information will be subject to audit.
The ISAs require more detailed documentation and testing of the controls in the main accounting system and the associated financial systems than in previous years. The controls and operation of significant financial systems may not provide sufficient assurance about the fair presentation of your financial statements.
The Authority is implementing a new financial ledger from 1 April 2005.
Grant claim certification
Response
We will be holding detailed discussions with officers on the implementation of the new requirements.
In addition to the detailed discussions referred to above, we are also be holding seminars for finance representatives from each of the councils/authorities locally to provide the opportunity to exchange views on the key technical issues arising.
We will work closely with Internal Audit to gain appropriate assurance about the operation of your financial systems.
We will work with Internal Audit to ensure that adequate controls are operating within the system and that the information it provides is accurate and complete for the purpose of our opinion.
We do not currently certify any claims for grant from government departments. Any requests for certification that may arise will be subjected to the following approach:
claims for £50,000 or below will not be subject to certification;
claims between £50,001 and £100,000 will be subject to a reduced, light touch, certification audit; and
claims over £100,000 have an audit approach relevant to the auditor’s assessment of the control environment and management preparation of claims. A robust control environment would lead to a reduced audit approach for these claims.
There may be an opportunity to reflect the impact of the local area agreement on certification requirements for any claims incorporated into the agreement.
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We have agreed to undertake a project to help you develop a framework to manage and review your partnership working effectively. A detail project brief has been agreed for this work which will be undertaken and reported outside the Code of Practice audit.
Title
audit 2005/2006
Audit Manager
Audit Team Leader
Area Performance Lead
In relation to the audit of your financial statements we will comply with the Commission’s requirements in respect of independence and objectivity as set out at Appendix 4.
We are not aware of any relationships that may affect the independence and objectivity of the team, and which are required to be disclosed under auditing and ethical standards.
Ian Langdon
Name
Martin Robinson
Simon Farnsworth
Voluntary improvement work
Chris Peachey
AUDIT AND INSPECTION PLAN
ISA 260 (‘Communication of audit matters to those charged with governance’) requires us to report relevant matters relating the audit to those charged with governance. For the Authority, we have previously agreed that this responsibility will be discharged by reporting relevant matters to the Audit Committee.
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District Auditor and Relationship Manager
Status of our reports to the Authority
Our reports are prepared in the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission. Reports are prepared by appointed auditors and addressed to members or officers. They are prepared for the sole use of the audited body, and no responsibility is taken by auditors to any member or officer in their individual capacity, or to any third party.
The team
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The new Code of Audit Practice
The Audit Commission’s objectives in revising the Code
APPENDICES
A P P E N D I X 1
The Commission’s objectives in revising the Code are to achieve the following key outcomes:
a more streamlined audit targeted on areas where auditors have most to contribute to improvement;
a stronger emphasis on value for money, with a focus on audited bodies’ corporate performance and financial management arrangements; and
better and clearer reporting of the results of audits.
The new Code has been developed on the basis of the Commission’s model of public audit, which defines auditors’ responsibilities in relation to:
the financial statements of audited bodies; and
audited bodies’ arrangements for securing economy, efficiency and effectiveness in their use of resources.
The main changes being made through the introduction of the new Code
The main changes being introduced through the new Code are:
auditors' three responsibilities under the old Code, in relation to the financial aspects of corporate governance, the accounts and performance management, will be replaced by two responsibilities in relation to the accounts and use of resources, thereby mirroring their statutory responsibilities under the Audit Commission Act 1998. Auditors’ work in relation to the financial aspects of corporate governance will in future largely be covered by their work on the accounts – reflecting recent developments in auditing standards – with audit work in relation to financial standing carried out as part of the work in relation to the use of resources;
a clear focus, in auditors’ work on audited bodies’ arrangements for the use of resources, on overall financial and performance management arrangements. This work supports a new requirement for an explicit annual conclusion by the auditor in relation to audited bodies’ arrangements for securing value for money in the use of their resources;
a more explicit focus on improvement (through the risk assessment process) and on the need for auditors to have regard to the risks arising from audited bodies’ involvement in partnerships and joint working arrangements and, where appropriate, to ‘follow the public pound’ into and across such partnerships;
an emphasis on clearer, more timely reporting based on explicit conclusions and recommendations; and
a new style narrative audit report to meet statutory and professional requirements.
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Plan 2004/05 £
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CPA
The fee (plus VAT) will be charged in 12 equal instalments from April 2005 to March 2006.
you will inform us of significant developments impacting on our audit;
51,000
15,000
* Comparative information is not available for 2004/05 due to the change in the Code of Audit Practice which has reduced the three areas under the old Code to two areas.
Use of resources
*
*
officers will provide prompt responses to draft reports according to agreed timetables.
additional work is required of us by the Audit Commission or other regulators.
Assumptions
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Audit area
Audit and inspection fee
Total audit fee
Voluntary improvement work
Grant claim certification
A P P E N D I X 2
APPENDICES
officers will provide good quality working papers and records to support the accounts;
Internal Audit undertakes appropriate work on all material systems that provide figures in the financial statements sufficient that we can place reliance for the purposes of our audit recognising the shift in requirements introduced by the International Standards on Auditing;
51,000
Funded by ODPM grant
Plan 2005/06 £
Audit and Inspection Plan – Audit 2005/2006
15,750
44,550
Changes to the plan will be agreed with you. These may be required if:
new risks emerge; and
Where these requirements are not met, we may be required to undertake additional work which would be likely to result in an increased audit fee.
11,410
44,550
33,140
Total audit and inspection fee
Accounts
Internal Audit meets the appropriate professional standards;
officers will provide requested information within agreed timescales; and
In setting the fee we have assumed:
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Planned outputs
APPENDICES
A P P E N D I X 3
Our reports will be discussed and agreed with the appropriate officers before being issued to the appropriate Committee.
Planned output
Audit and Inspection Plan*
Auditor Scored Judgment
Interim Audit Memorandum
BVPP Opinion and PI Audit Memorandum
Report to Those Charged with Governance (ISA 260)
Final Accounts Memorandum
Annual Audit and Inspection Letter
Start date
February 2005
January 2005
April 2006
August 2006
August 2006
1 July 2006
October 2006
Draft due date
April 2005
February 2005
May 2006
October 2006
September 2006
October 2006
16 December 2006
Key contact
District Auditor and Relationship Manager
Audit Manager
Audit Manager
Audit Manager
Audit Manager
Audit Manager
District Auditor and Relationship Manager
* To be revisited as necessary during the year to reflect outcome of 2005/06 interim visit.
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The Audit Commission’s requirements in respect of independence and objectivity
APPENDICES
A P P E N D I X 4
Auditors appointed by the Audit Commission are subject to the Code of Audit Practice (the Code) which includes the requirement to comply with ISAs when auditing the financial statements. ISA 260 requires auditors to communicate to those charged with governance, at least annually, all relationships that may bear on the firm’s independence and the objectivity of the audit engagement partner and audit staff. Ethical standard 1 also places requirements on auditors in relation to integrity, objectivity and independence.
The ISA defines ‘those charged with governance’ as ‘those persons entrusted with the supervision, control and direction of an entity’. In your case the appropriate addressee of communications from the auditor to those charged with governance is the Audit Committee.
Auditors are required by the Code to:
carry out their work with independence and objectivity;
exercise their professional judgement and act independently of both the Commission and the audited body;
maintain an objective attitude at all times and not act in any way that might give rise to, or be perceived to give rise to, a conflict of interest; and
resist any improper attempt to influence their judgement in the conduct of the audit.
In addition, the Code specifies that auditors should not carry out work for an audited body that does not relate directly to the discharge of the auditors’ functions under the Code. If the Council invites us to carry out riskbased work in a particular area, which cannot otherwise be justified to support our audit conclusions, it will be clearly differentiated as work carried out under section 35 of the Audit Commission Act 1998.
The Code also states that the Commission issues guidance under its powers to appoint auditors and to determine their terms of appointment. The Standing Guidance for Auditors includes several references to arrangements designed to support and reinforce the requirements relating to independence, which auditors must comply with. These are as follows:
any staff involved on Commission work who wish to engage in political activity should obtain prior approval from the Partner or Regional Director;
audit staff are expected not to accept appointments as lay school inspectors;
firms are expected not to risk damaging working relationships by bidding for work within an audited body’s area in direct competition with the body’s own staff without having discussed and agreed a local protocol with the body concerned;
auditors are expected to comply with the Commission’s statements on firms not providing personal financial or tax advice to certain senior individuals at their audited bodies, auditors’ conflicts of interest in relation to PFI procurement at audited bodies, and disposal of consultancy practices and auditors’ independence;
auditors appointed by the Commission should not accept engagements which involve commenting on the performance of other Commission auditors on Commission work without first consulting the Commission;
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APPENDICES
auditors are expected to comply with the Commission’s policy for both the District Auditor/Partner and the second in command (Senior Manager/Manager) to be changed on each audit at least once every five years with effect from 1 April 2003 (subject to agreed transitional arrangements);
audit suppliers are required to obtain the Commission’s written approval prior to changing any District Auditor or Audit Partner/Director in respect of each audited body; and
the Commission must be notified of any change of second in command within one month of making the change. Where a new Partner/Director or second in command has not previously undertaken audits under the Audit Commission Act 1998 or has not previously worked for the audit supplier, the audit supplier is required to provide brief details of the individual’s relevant qualifications, skills and experience.
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